By G. Sharmila
In our previous article, we examined the financial health of mobile operators in Malaysia against that of their Asia Pacific peers and whether they can afford to lower mobile rates. Today, we look at what other mobile users in the region pay and how our rates fare in comparison.
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It is no secret that the mobile rates paid by Malaysians are among the highest in the Asian region (ex-Japan and South Korea). Don’t believe us? Let’s take a look at postpaid mobile plans to see what we, as well as mobile users in neighbouring Asian countries pay (see table below).
As can be seen from the table, mobile plans in Malaysia are more expensive than that of Indonesia, Thailand, China and India although cheaper than those offered by Singapore. The difference between rates we pay and what Indonesians pay is especially glaring. For example, a 4G mobile plan by Indonesia’s Telkomsel costs just US$6.30 a month, whereas a 4G plan by Malaysia’s Maxis Bhd costs nearly US$36 a month. (It should be noted here that the pricing for most countries includes 3G and 4G plans, with the exception of China and Singapore, where pricing for 4G plans have been used.)
Even in countries like the United Kingdom, 4G plans actually cost less than they do in Malaysia. A SIM-only postpaid mobile plan with 2GB of data with unlimited call minutes and texts from from UK mobile carrier BT costs 20 GBP pounds a month, which is roughly RM108. Whereas a 4G plan with 2GB data from Maxis costs around RM126 a month, as mentioned above.
Title: A comparison of postpaid mobile plans offered in selected Asia Pacific countries (as of Jan 12th, 2015)
What’s more interesting is that in markets where mobile rates are lower, the retail prices offered are lower than their mobile termination rates (MTRs). MTRs as defined by New Zealand’s Commerce Commission, are the fees mobile companies charge other carriers to terminate calls on their networks. Technically they are difficult to compute and there are different methods. But they are a significant input cost in providing retail services of fixed-to-mobile and mobile-to-mobile calls.
The Organisation for Economic Co-operation and Development in a 2012 report noted that higher termination rates lock in the business model of a fixed or mobile operator into one that requires charging for voice minutes. “This does not mean that if termination charges are low or zero a network will not charge for voice calls by the minute, but an innovation and greater flexibility in business models is more likely if termination rates are low or zero,” the report highlighted.
For the purpose of this article, we will look at MTRs charged by mobile operators to each other, as we’re more concerned with retail prices that mobile users pay. In Malaysia, the government regulates MTRs using a LRIC (long-run incremental cost) model, where incremental costs are calculated using a bottom-up model.
From the table, it is clear that MTRs in China and India are the lowest in the region, which explains why they are able to charge such low mobile rates. Surprisingly however, Indonesia and Thailand are able to charge lower mobile rates despite their MTRs being higher than that of Malaysia. (Note: Singapore’s rates are not included as the island nation uses a different mobile interconnection charging regime based on Mobile-Party-Pays (MPP), which is similar to Bill-And-Keep. Hence Singapore’s MTRs are set to zero).
Mobile termination rates (2006-2013), in US cents
So how are Indonesia and Thailand able to charge such low prices despite having relatively high MTRs? As one regional telco analyst told KiniBiz, it all boils down to competition, price wars and the structure of the respective telco industries.
“Some of the markets in Asia have gone through a massive price war compared to Malaysia. One example is Indonesia, when XL Axiata was number three it was destructive by cutting prices. Thailand is a similar case, in late 2000 it had price wars and prices were slashed quite a bit,” the analyst said.
But what of the Malaysian market, one might ask? “Malaysia saw a price war towards mid-to-late 2008 or 2009 in the market. Ever since then the market has been fairly rational until of late. Companies such as U Mobile with their lower prices and increased share of the data market, have been fairly disruptive to the market over the past one and a half years,” the analyst explained.
Although the telco regulator MCMC (short for the Malaysian Communications and Multimedia Commission) is expected to slash the MTR further by the end of this year, the analyst feels that mobile rates may not change much. “The Malaysian mobile market is purely market driven – unless the telcos are incentivised to drop rates, rates are unlikely to change,” the analyst said.
It should be noted that KiniBiz contacted DiGi, Celcom, Maxis and U Mobile to cull their feedback and opinions on mobile rates in the Malaysian market, however all four telcos declined interviews for this article.
While it is likely that mobile rates are going to remain static for awhile yet, more can be done to reduce rates.
Tomorrow: How mobile rates can be reduced
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